China won't seize Mombasa Port over SGR loan – Chinese official

The foreign affairs officer says it remains a Kenyan asset no matter what happens

In Summary
  • SGR was built at a cost of USD3.6 billion (ShSh429 billion) by the China Roads and Bridge Company.
  • Meanwhile, Peng said China will in the next three years increase its support for African countries in nine areas.
SGR wall in Mtito Andei on August 15, 2022.
SGR wall in Mtito Andei on August 15, 2022.
Image: FILE

China will not seize Mombasa Port even if Kenya defaults on repayment of the SGR loan, a Chinese government official has said.

Speaking during a meeting with African journalists in Beijing, China, Wu Peng, the director-general of the Department of African Affairs in the Chinese Foreign Ministry said the Mombasa port will remain a Kenyan asset no matter what happens.

“I can tell you very clearly, even if you default on the SGR loan, Mombasa port is still Kenya’s port. We cannot seize the Mombasa port according to the SGR agreements,” he said on Monday.

The Standard Gauge Railway was built at a cost of $3.6 billion (Sh429 billion) by the China Roads and Bridge Company and it's Kenya’s biggest infrastructure project.

Critics of outgoing President Uhuru Kenyatta, including politicians and civil society organisation such as Muslims for Human Rights, have been lobbying to have the agreements signed between the government and the Chinese entities made public.

However, the government, despite a court order, has refused to make public the loan contracts.

The government cited a non-disclosure clause in the contracts, a matter that has been emphasised by Peng.

“When we signed the agreement, there was a commercial secret agreement. That is a very common commercial practice,” Wu said.

He noted that the Kenyan government will lose credibility should it breach that agreement and this will consequently strain the Kenya-China bilateral relations.

“The spirit of contract is the cornerstone of doing business. If there is no spirit of contract, how can we do business?” he asked.

He said there is nothing sinister in the contract and China did not and cannot cheat the Kenyan people.

The former ambassador to Kenya said the Kenyan people, through their representatives in Parliament, audited the contract and the China Road and Bridges Company that constructed the SGR in 2020.The audit lasted a year.

The diplomat said he is confident that the SGR can now repay the loan without straining the Kenyan taxpayers.

This is because according to information at his disposal, the SGR reached the break-even point in 2021.

“That means the cost of running or operating the railroad can be covered by the revenue made by the railroad. This means no more money is needed to be input into the SGR to run it,” Wu said.

However, the revenue currently being made, which he said stands at between $11 million and $12 million a month (Sh1.3 billion and Sh1.4 billion), cannot cover the repayment of the Sh378 billion loan issued by the Exim Bank of China.

“Our Chinese operator company told me that is the revenue they collect a month,” Wu said, citing the increase in shipment volume via the SGR due to economic development in Kenya.

He noted that following the completion of the 120km SGR from Nairobi to Naivasha, the government refurbished the metre gauge railway from Naivasha to Malaba to facilitate the transportation of goods to Kampala.

Critics of Uhuru's administration had been calling the SGR a white elephant project that was meant to benefit a few businessmen.

However, Wu said only time will tell.

“Whether it is a white elephant project or not, let time prove that. No need for me to say much," he said.

“I have confidence that the SGR can bring economic and social benefits to Kenya and the economy."

He said Kenyans must have confidence in their own government and economy.

Meanwhile, Wu said China will in the next three years increase its support for African countries in nine areas.

They include health and medical service, poverty reduction and agricultural development, trade and investment promotion, digital innovation, green development and capacity building.

Other areas that China will focus on are cultural and people-to-people exchange, peace and security.

This is in line with the outcome of the eighth ministerial conference of the Forum on China-Africa Cooperation in Dakar, Senagal, in November last year.

He said already, China has shown its commitment to helping Kenya and other African countries in the health sector through the provision of about 260 million doses of Covid-19 vaccines to 45 countries and the African Union Commission.

There has been about 120 batches of emergency supplies from China to all African countries, which, Wu said, contributed to Africa’s early recovery from Covid-19 and bridging the immunisation gap.

“There is also the construction of the Africa CDC headquarters, launched in January 2021, which China is helping to build in Addis Ababa, Ethiopia. The first phase is advancing in order and the work is anticipated to be completed by 2023,” Peng said.

The diplomat said Kenya’s agricultural development potential, just like in the rest of African countries, is huge because of the availability of a lot of arable land.

“But unfortunately you still have to import a lot of grains from the outside world. That costs you a lot of cyclical currency. That damages your international balance sheet. This doesn’t make sense at all," he said.

"With land and labour easily available, African countries such as Kenya need the right policy to promote private investment in industrial large scale farming to improve food security."

After three years of waiting amid stringent measures which required Kenya to only export frozen crop, China finally cleared 15 Kenyan firms to export fresh avocados to the over 1.4-billion strong Chinese market.

This followed the early January signing of protocols between the two countries to facilitate bilateral trade mainly involving the export of avocados and aquatic products from Kenya to China.

Sunripe, a fresh produce exporter, and Kakuzi PLC were the first two firms to benefit from the deal and were able to ship the first two consignments of avocado to China in late July.

Kakuzi shipped the inaugural Hass variety avocado consignment.

(Edited by Tabnacha O)

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